eBooks Provide Five Lessons for Innovators

When Amazon introduced the Kindle in 2007, a society-on-the-go was already snapping up smart phones and other mobile devices. According to Pew Research data, 12% of American adults over eighteen owned ebooks as of May, 2011*, and more will own them by January, 2012. However, challenges remain for ebook vendors. You could face similar challenges when introducing a disruptive product or service.

Amazon and Barnes & Noble had instant credibility as sellers of ebooks. However, neither had previously developed and sold a high tech product. Though Amazon, the pioneer, could skim off early adopters, Barnes & Noble benefitted from the fact that the pioneer had created the market, educated prospects, and convinced innovators to buy ebook readers and ebooks. Barnes & Noble already had a retail outlet, as well as an online store. Amazon had to build relationships with Staples, Best Buy, and other retailers.

Lessons Learned

While considerable experimentation is taking place in the ebook niche, some lessons are emerging:

Sellers of complementary products should make mutually satisfactory arrangements with their "other halves" before launch time. Some of the six largest U.S. book publishers have refused to sell their ebooks at Amazon's prices. Amazon and Barnes & Noble have alienated publishers by releasing lower-priced digital copies of books before the publishers have released the paperback version.

According to NPR's All Things Considered**, Amazon Prime has released ebook versions of books published by small publishers without the permission of either the publisher or the author. Sourcebook, the publisher of Hugh Nissenson's The Pilgrim, prices the hardcover book at $24.99. However, The Pilgrim is available from Amazon.com in hardcover for $16.99 and as an ebook for $9.99. Barnes & Noble charges $17.23 for a hardcover copy of The Pilgrim and $16.24 for the ebook. Who decides when and how to publish a book and how much to charge?

Discount sellers will inevitably emerge. Several sites sell discounted ebooks, including http://ebooks.addall.com/ and http://www.thereadingsite.com/join.html (downloads are free after payment of membership fee). Others sell discounted ereaders: digitalhaven.com (ereaders manufactured in China).

Price cutting will boost sales, but not necessarily profits. Amazon's Prime program is attracting many new Kindle buyers and increasing per capita ebook downloads. For $79 per year, Prime subscribers can download up to one free Kindle book a month. While some Amazon books are free, others cost $12.99 or more. With Amazon Prime, the average per book price is $6.58. What are Amazon's margins?

Customers want to own what they purchase. Customers want to own their ebooks--or music files--and loan them to others. Amazon Prime customers may borrow one book at a time. On the other hand, Barnes customers can loan their ebooks to a friend. Does the purchaser own the ebook? Ownership of ebooks is even more complicated for libraries.

Technically superior products don't always prevail. The more expensive Nook will have a hard time catching up with the more affordable Kindle, despite the advantages of the Color Nooks: color, longer battery life, and email and web access.

Ebooks exemplify how an innovative product gradually gains acceptance in the marketplace. Are your competitors introducing disruptive new products or services? Does it make sense for you to compete in that arena? If so, how could you differentiate yourself? We can help you explore new opportunities in your market.

* http://pewinternet.org/Reports/2011/E-readers-and-tablets/Report.aspx

**www.npr.org/2011/11/14/142315023/kindle, Melissa Block host, 11/14/11

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